China’s spectacular growth over the last 40 years has slowed but remains strong, leading the world in economic recovery after the global financial crisis, and even in the current COVID-19 pandemic after a devasting blow early in 2020. Yet, a number of worrying developments have emerged, most recently the troubles that China’s second largest property development company, the Evergrande Group, have suffered.
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At the end of 2021 China Evergrande Group—one of China’s biggest property developers—finally defaulted on its bonds. The default didn’t spark a Lehman Moment—as widely prophesied—or any significant market upheaval, but it’s increasingly clear that Evergrande’s problems mark the start of a momentous shift in how China’s economy grows. Over the past 18 months, Beijing has induced a slowdown of the property sector with the goal of better ensuring financial sector stability and the sustainability of property sector growth. However, it has resulted in defaults, restructuring, and consolidation among China’s largest developers, and has implication for local government finance and the pace of economic growth. This talk will discuss the challenges posed by Evergrande’s decline and imminent restructuring, what Beijing is trying to achieve by reining in the property sector, and what risks are involved.
Dinny McMahon is the author of “China's Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans, and the End of the Chinese Miracle,” a ground up look at the mechanics of China’s political economy, which he wrote while a fellow at the Woodrow Wilson Center for International Scholars. He later moved to MacroPolo, the Paulson Institute’s think tank in Chicago, where he researched China’s efforts to clean up its financial system. Dinny started his career as a financial journalist in China, spending six years in Beijing with The Wall Street Journal, and four years with Dow Jones Newswires in Shanghai, where he also contributed to the Far Eastern Economic Review. Dinny is currently working on a project for the Wilson Center on China’s efforts to reduce its reliance on the US dollar. He also provides independent research on China’s financial system for financial services firms.
This event is part of the 2022 Winter webinar series, The Future of China's Economy, sponsored by the APARC China Program.
Via Zoom Webinar. Register at: https://bit.ly/3pkTQfE
Following the 2021 Taihe Civilizations Forum, the Taihe International Communications Center hosted an online discussion on October 8 that captures the candid and profound reflections of senior officials whose actions have shaped the course of ties between China and the United States.
Dr. Thomas Fingar, Shorenstein APARC Fellow in the Freeman Spogli Institute for International Studies at Stanford University, former Chairman of the National Intelligence Council, and former Assistant Secretary of State, and Senior Colonel Zhou Bo (ret.), Senior Fellow at Center for International Security and Strategy at Tsinghua University, China Forum Expert, and former Director of Center for Security Cooperation of the Office for International Military Cooperation of Ministry of National Defense, were invited to join this dialogue.
During their conversation, Dr. Fingar and Senior Colonel Zhou exchanged ideas on important topics such as the current state of China-U.S. relations, the future development of the two countries' bilateral ties, the rationale behind the US foreign policy and the American alliance system, as well as the "extreme competition" that China and the U.S. are trapped in.
Taiwan. Hypersonic missiles. The South China Sea. In the last few months, China’s activities have grabbed headlines and fueled speculation about its intentions. But how much of this action is posturing, and how much should U.S. policymakers and strategists take seriously?
To help explain what’s going on with our biggest competitor, FSI Center Fellow Oriana Skylar Mastro, a specialist on China’s military and an active member of the United States Air Force Reserves, joins Michael McFaul on World Class to debunk some of the myths that persist about China’s capabilities and reframe how the U.S. needs to think about strategic competition with Beijing. Listen to their full episode and read highlights from the conversation below.
Click here for a transcript of “We Need To Rethink Our Assumptions about China’s Strategic Goals”
Twenty years ago, the Chinese-Taiwan invasion plan was to take a couple of fishing vessels and paddle their way across the strait. In the 1990s, China had very limited, and often no ability to fly over water, or at night, or in weather, and their ships had no defenses.
For many, many years we knew that China was willing to fight if Taiwan declared independence. Fighting a war in any country that is big and resolved is problematic. But it was never the case that the United States was going to lose that war; it was always a matter of, “How many days?” How many days is it going to take us to win?
In the intervening years, China's military has changed both quantitatively and qualitatively. Now they have the largest navy in the world, and those ships are some of the most advanced surface ships that can be comparable to those of the United States. Same with their fighters; they have fifth generation airplanes and the largest airforce in the region. They’ve put all these capabilities online, and at the same time, they [have also] started developing capabilities to reach out and touch the United States with.
They developed the capability to hit moving ships at sea, which is something the United States doesn’t have the capability to do. They have a huge cruise and ballistic missile program that basically can take out a U.S. base like Kadena in the region in a matter of hours, should they ever be willing to make a direct hit on the U.S.
This doesn't mean that China is more powerful than the United States; China still can’t project power outside the Indo-Pacific region, and even there it’s mostly through space, cyber, and nuclear weapons. But most of the contingencies we're talking about are really close to China, so it doesn’t really matter that they can’t project power. So, on the conventional side, I’m very concerned.
The whole goal of the Communist Party, since its founding in 1949, has been to resolve this Taiwan issue.
Now they have the ships, the aircraft, and they’ve reorganized their whole military so that they can do joint operations, so that the navy and the air force can do an invasion of Taiwan. And a lot of those efforts came to a successful conclusion at the end of 2020. And that's why people like myself, not because of the capabilities, but because when I was in Beijing and talked to the Chinese military and government officials, they said, “We could do this now, and maybe we should think about it.”
We know from behavioral economics that countries and people are much more willing to take risks to not lose something that they think is theirs, versus when they are trying to get something which they don't think is theirs. In the Chinese mindset, Taiwan, the South China Sea, East China Sea, etc. is already theirs, and the United States is trying to take it from them. That makes the situation even more problematic.
The Biden administration is doing a lot of political maneuvering to show that the United States is willing to defend Taiwan. And I think it’s just upsetting Beijing, because they think we’re changing the political status quo. It also does nothing to enhance our deterrence, because it doesn't signal anything about our capability to defend Taiwan.
The Chinese basically assume the United States will intervene. Their big question is, can they still win? We need to show China that they cannot win, and that’s about showing out capabilities in the region. It’s about aggressively negotiating new host arrangements, more access for the U.S. military, and new international institutions and treaties that constrain the ways China leverages power.
I'm a military person, but I'm totally on board with leading with diplomacy. But I don't see those types of efforts coming out of the Biden administration. They seem to want to double down and do the same things, just with more allies and partners. I'm supportive of it, but I just don't think it's enough.
On the World Class podcast, Oriana Skylar Mastro argues that in order to set effective policy toward China, the United States needs to better understand how and why China is projecting power.
Drawing on insights from recent economic theories of incomplete contracts, we develop a theoretical model on authority relationships in the Chinese bureaucracy by conceptualizing the allocation of control rights in goal setting, inspections, and provision of incentives among the principal, supervisor, and agents. Variations in the allocation of these control rights give rise to different modes of governance and entail distinct behavioral implications among the parties. The proposed model provides a unified framework and a set of analytical concepts to examine different governance structures, varying authority relationships, and the specific principal-agent problems entailed in a bureaucratic setting. We will illustrate this through a case study of authority relationships and ensuing behavioral patterns in the environmental protection arena over a five-year cycle of policy implementation.
At the initial epicenter of the COVID-19 pandemic, the Chinese governments, both central and local, responded to the outbreak in Wuhan, with the drastic measure of the lockdown of the entire city of 11 million residents. The moment of organizational response to crisis crystallized the fundamentals of Chinese bureaucracy, its bureaucratic processes, dispositions, and mentalities, as it had to haphazardly patch together segments of formal and informal practice for mobilization. In this commentary, I reflect on what we have learned about Chinese bureaucracy in this dramatic episode.
As China and many other countries are now facing the aftermath of the pandemic and adapting to a significantly changed global environment, organizational resilience moves to the center of attention. Making sense of the characteristics of the Chinese government helps us better understand the potential for organizational resilience in the post-pandemic era. We look into the past in order to better understand what lies ahead.
Chinese bureaucracy, with its long history and distinctive characteristics, has provided the organizational basis of governance and played a pivotal role in the economic takeoff in recent decades. Chinese bureaucracy also shows intriguing dualism between entrepreneurial activism and bureaucratic inertia, between formal rules and informal institutions, and between high responsiveness and noticeable loose coupling.
This study explores these distinctive features of Chinese bureaucracy through three lenses: Weber's comparative-historical approach helps locate Chinese bureaucracy in a distinct mode of domination; the Confucian lens identifies the prevalence of informal institutions that underlie bureaucratic behaviors; and the Marchian lens sheds light on the organized anarchy and set of mechanisms that shape the key characteristics of Chinese bureaucracy.
On October 21, 2021, the APARC China Program had the opportunity to host Peter Martin, Defense Policy and Intelligence Reporter for Bloomberg News, for a program on Chinese displomacy. In honor of his recently released book, China's Civilian Army: The Making of Wolf Warrior Diplomacy, Mr. Martin gave us a deep dive into the origins of this contentious diplomatic style and what it tells us about domestic politics in China. The panel was moderated by Professor Jean Oi, William Haas Professor of Chinese Politics and director of the APARC China Program.
As many who follow Chinese politics will be aware, Chinese diplomacy in the past several years has become increasingly assertive and its diplomats have used sharper language. Based on Chinese action movies of the same name, this pointed style of communication has earned these diplomats the title "wolf warriors." Some of the more stand-out examples of wolf warrior diplomacy include China’s Ministry of Foreign Affairs spokesperson Zhao Lijian's claim that COVID-19 was actually created by the United States, or the uncomfortable exchange between American and Chinese diplomats at the US-China Alaska summit in March, 2021.
In this program, Mr. Martin traced the roots of China's approach to diplomacy back to the communist revolution of 1949 and told the story of how it has evolved through social upheaval, famine, capitalist reforms, and China's rise to superpower status. His book draws on dozens of interviews and--for the first time--on the memoirs of more than 100 retired Chinese diplomats. The program was followed by a robust Q&A session between Mr. Martin and the audience. Watch now:
For more information about China's Civilian Army: The Making of Wolf Warrior Diplomacy or to purchase a copy, please click here.
Peter Martin discusses the advent of Wolf Warrior Diplomacy in Chinese politics — is it really such a new phenomenon after all?
On October 6, 2021, the APARC China Program hosted the panel program, "Engaging China: Fifty Years of Sino-American Relations." In honor of her recently released book of the same title, Director of the Grassroots China Initiative Anne Thurston was joined by contributors Mary Bullock, President Emerita of Agnes Scott College; Thomas Fingar, Shorenstein APARC Fellow; and David M. Lampton, Professor Emeritus at Johns Hopkins School of Advanced International Studies (SAIS). Thomas Fingar also moderated the panel.
Recent years have seen the U.S.-China relationship rapidly deteriorate. Engaging China brings together leading China specialists—ranging from academics to NGO leaders to former government officials—to analyze the past, present, and future of U.S.-China relations.
During their panel, Bullock, Fingar, Lampton, and Thurston reflected upon the complex and multifaceted nature of American engagement with China since the waning days of Mao’s rule. What initially motivated U.S.’ rapprochement with China? Until recent years, what logic and processes have underpinned the U.S. foreign policy posture towards China? What were the gains and the missteps made during five decades of America’s engagement policy toward China? What is the significance of our rapidly deteriorating bilateral relations today? Watch now:
For more information about Engaging China or to purchase a copy, please click here.
Was the strategy of engagement with China worthwhile? Experts Mary Bullock, Thomas Fingar, David M. Lampton, and Anne Thurston discuss their recent release, "Engaging China: Fifty Years of Sino-American Relations."
China has been making efforts to establish a universal health care coverage system through multiple social health insurance schemes. As these insurance schemes cover different populations with different financing and reimbursement levels, large disparities remain in health care access and health outcomes among people covered. The government has launched an urban-rural integration policy for social health insurance to reduce disparities in access and health outcomes. We adopt a difference-in-differences propensity score matching approach to estimate the effects of this integration policy on health care utilization, financial risk protection, and health status, using nationally representative Chinese household survey data.
The results show that the integration policy has significantly improved the financial risk protection and self-assessed health of rural residents in China, which could be attributed to a decline in out-of-pocket payment. The low-income rural residents benefit most from this policy. There is no evidence that it has pronounced effects among urban residents. Greater efforts to increase reimbursement rates and to expand beneficiary populations could help to mitigate remaining urban-rural disparities. The findings in this study would contribute to a better understanding of the impacts of health insurance expansion in low- and middle-income countries.
